Similarly, in our day-to-day life, we often let uncertainty dress itself up in a scary costume where fears and misperceptions can take on a life of their own. I have seen that time and time again in the life insurance industry where there is no shortage of misperceptions.
What would happen if life insurance myths could dress up for Halloween?
Myth: Income matters most
Always a favorite, perhaps for the ease of costume (who doesn't have a jersey and some eye black?) the star athlete suggests a wage-earner's income is the most important factor in determining how much life insurance you need. It is certainly important, but it neglects the important role each player performs on a team.
In 2014, Salary.com estimated it would cost a family $118,905 in salary to replace all the duties of a stay-at-home mother, while replacing a working mom's household duties would cost $70,107.
Myth: Only the wealthy can afford life insurance
This is sure to be a popular costume this fall, complete with the "Make America Great Again" hats. Life insurance protection isn’t meant for The Donald. Quite the opposite! His family would be fine — from a financial standpoint — if something were to happen to him. Lower and middle-class families would not.
The good news is it doesn’t take a billionaire to buy a policy. A 35-year-old man could get a 20 year, $500,0000 term-life policy for as little as $24 a month. A woman could get the same policy for just $20 a month — amazingly inexpensive.
Myth: Life insurance requires a lot of paperwork
It's true, life insurance does take some time from purchase to medical check, but you will not be bogged down in paperwork. In many cases, the online application takes as little as 15 minutes to complete, while the medical check is done whenever and wherever it’s most convenient for you.
Myth: The young don’t need life insurance
OK, Evil Knievel may no longer be the most popular costume, but he was once ubiquitous in pop culture. While he never died during his stunts, he broke more than 433 bones. The same goes for young people, who believe themselves invulnerable.
Age shouldn’t play any role in determining whether you need to buy life insurance. The only question that matters is: Does my family depend on my income to survive? If that answer is yes, you need coverage.
The benefit of being young is the sooner you get life insurance, the lower the price. Unlike health insurance, where the young and healthy subsidize the old, life insurance is priced based on the likelihood of a payout. It’s substantially cheaper the younger you are.
The other benefit of getting insurance when you’re young is you can lock in a policy before anything happens to your health. If something happens to throw you off that track — even a curable illness — you are at least locked into a cheaper policy for the length of that term.
Myth: When my family needs it, the life insurance company won’t pay out
Many of us view life insurance companies as pirates who plunder and try to get out of paying what they owe. It’s probably sunk into our subconscious since we’ve all heard stories of insurance companies refusing to pay out after floods or car accidents. We think that when we need it, the insurance won’t be there.
A lot of these stories come from either not working with reputable insurance companies or from people not really understanding the type of policy they have. For example, many people don’t know if their homeowners insurance covers flooding — though it’s quite clear in the policy.
With the right guide, life insurance is simple. If you work with an A-rated carrier, you won't run into any issues.
So what's a better choice of character? Sherlock Holmes. The detective isn't easily scared away and uses all his powers of perception to make smart decisions. Just don’t expect to need Holmes’s reasoning to find the right life insurance policy. The hardest part is getting past the misperceptions and deciding to act.
Abby Reddy is a Chartered Life Underwriter and the vice president of marketing and web at Quotacy, an online life insurance agent. Quotacy offers a free life insurance calculator and accurate quotes on term policies, all without requiring any personal contact information.
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